Corporate Life, Philosophy, Work and Life

Was Yours, Now Mine

I feel I have lived through an era of great changes. The pace of change can seem accelerated if you travel or emigrate because various geographical regions act as different slices in time. I have had the benefit (or the misfortune) of multiple emigrations. With that, coupled with my advancing years, I feel as though I have seen a lot. Most of what I have seen fills me with a foreboding of gloom and doom. Perhaps it is merely the pessimism characteristic of an unduly cynical mind, or perhaps it is the true decay of our global ethical standards.

On the positive side, the pace of change is indeed fast and furious. This is the kind of change you like — you know, vinyl to spool tape to cassette to MP3 to iPod kind. Or the land-line to satellite to cell to Skype to Twitter kind. However, along with this positive and obvious track of changes, there is an insidiously slow and troubling track creeping up on us. It is n this context that I want to reuse the over-used allegory of the frog-in-a-pot.

If you put a frog in hot water, it will jump out of the pot and save its skin. But if you place the frog in cold water, and slowly heat up the pot, it won’t feel the change and boil to death. The slowness of change is deadly. So let me be the frog with delusions of grandeur; allow me to highlight the unhealthy changes accumulating around us. You see, along with the technological miracle that we are living through, there is an economic or financial nightmare that is spreading its tentacles over all aspects of our social and political existence, transfixing everything in place in its vice-like grip. Slowly. Very slowly. Because of this invisible hold on us, with every iPod we buy, we (the middle-class) take a couple of dollars from the very poor and give it to the very rich. We don’t see it that way because some of us make a few cents in the process. The Apple store franchisee makes a few cents, the employee-of-the-month gets a token raise, an apple developer may enjoy a nice vacation, or a senior executive might get a new jet, the economy of the country goes up a notch, NASDAQ (and so everybody’s pension) goes up a tiny fraction — all are happy, right?

Well, there is this little question of the packaging material that may have killed part of a tree somewhere, in Brazil, perhaps, where people don’t know that the trees belong to them. May be a little bit of pollution escaped into the air or a river in China where the locals haven’t realized that these resources are their heirlooms. May be some moderately toxic junk ended up in a landfill in Africa somewhere where they haven’t quite grasped the concept of land ownership. It may have cost a developer in Bangalore or a call-center girl in Manilla an hour or two more than it should because they don’t know that their time is a resource bought low and sold high in markets they don’t see or know of. It is from these distant places and phantom people that we pick up a couple of dollars and pass on to the equally distant corporate coffers and stock markets. We take what is not ours from the unknown owners to feed the avarice of unseen players. And, like Milo Minderbinder would say, everybody has a share. This is the modern capitalism of the corporate era, where we have all become tiny cogs in a giant wheel inexorably rolling on to nowhere in particular, but obliterating much in the process.

The problem with capitalism as an economic ideology is that it is pretty much unopposed now. Only through a conflict of ideology can a balance of some sort emerge. Every conflict, by definition, requires adversaries, at least two of them. And so does an ideological struggle. The struggle is between capitalism and communism (or socialism, I’m not sure of the difference). The former says we should lay off the markets and let greed and selfishness run its course. Well, if you don’t like the sound of “greed and selfishness,” try “ambition and drive.” Associate it with words like freedom and democracy, and this “Laissez-Faire” ideology a la Adam Smith is a winning formula.

Standing in the other corner is the opposing ideology, which says we should control the flow of money and resources, and spread happiness. Unfortunately this ideology got associated with nasty words like totalitarianism, bureaucracy, mass murder, killing fields of Cambodia etc. Little wonder that it lost, save for this economic powerhouse called China. But the victory of China is no consolation for the socialist camp because China did it by redefining socialism or communism to essentially mean capitalism. So the victory of capitalism is, to all intents and purposes, a slam dunk. To the victors belong to spoils of history. And so, the socio-politico-economic ideology of capitalism enjoys the mellifluous association of nice words like liberty, equal opportunity, democracy etc., while communism is a failed experiment relegated to the “also-ran” category of ideologies such as fascism, Nazism and other evil stuff. So the battle between capitalism and the occupy-wall-street movements is pathetically asymmetric.

A battle between two well-matched opponents is nice to watch; say, a match between Djokovic and Federer. On the other hand, a “match” between Federer and me would be exciting only to me — if that. If you are into violent entertainment, a boxing match between two heavy weights would be something interesting to watch. but a brawny boxer beating the living daylights out of a two-year-old would only fill you with revolt and disgust (which is similar to the feeling I had during the ’91 Gulf War).

Don’t worry, I’m not about to defend or try to revive socialism on this blog, because I don’t think a centrally controlled economy works either. What worries me is the fact that capitalism does not have a worthy adversary now. Shouldn’t it worry you as well? Corporate capitalism is beating the living daylights out of everything that one might call decent and human. Should we ignore and learn to love our disgust just because we got a share?

Photo by Byzantine_K cc

Corporate Life, Environment, Work and Life

Troubled Conscience

At times I suffer from a troubled conscience. I get this sinking feeling that I am part of a large problem rather than a solution to it. Working for a modern corporate empire, a bank to boot, it is hard to avoid this feeling — if you feel anything at all.

Then I found a straw to grasp at. It was an observation made by Mohamed El-Erian, CEO of Pimco, on Hardtalk with Stephen Sackur. In response to a direct question, he said that the “Occupy Wall Street” guys had a point. Old Stevie was not going to miss a trick like that. He pounced, “Are you, you the head of a hedge fund managing over a trillion dollars, the epitome of modern capitalism, admitting that the system is flawed? Are you going to stop what you are doing?” (Of course, I’m paraphrasing. He probably asked it better.)

I loved the intelligent response that Mr. El-Erian gave. You see, you don’t get to the top of a corporate empire with sub-par intelligence, much as we techies would like to believe otherwise. He said (paraphrasing again), “You asked me about what should happen, the system as it should be. We work with what is likely to happen. In an ideal world, the two should converge. Our job is to make use of what is likely to happen and make profit for our clients. It is the job of policy makers to ensure that what is likely to happen is close to what should happen.” This line of thought was the straw that I was looking for, something that I felt would assuage my troubled conscience.

Right now, there is a large gulf between what should happen and what is likely to happen. What should happen is prosperity for all and peace and happiness on earth. What is likely to happen is obscene prosperity for a select few and misery for the rest. Yet, by our skewed economic indicators (like stock indices and GDPs), we are still doing well. The party is still on, they seem to indicate. Now is not the time to worry about the mess we are creating, and about the underpaid migrant workers who will have to clean it up. Now is the time to eat, drink and be merry, for tomorrow is not ours. It’s theirs, hopefully.

What is interesting and really smart about Mr. El-Erian’s observation is how neatly he cleaved the responsibility into two parts — his job which is to make use of the status quo, and somebody else’s job, which is to improve it. Thinking a bit more about it, and recalling the opening  scene of every one of those Mahabharata episodes where Krishna says, “In a battle between the good and the evil, those who stand on the side lines are just as guilty as the evil,” I wonder whether this observation on the ‘way things are,’ for which I shouldn’t count myself responsible, is good enough a cure for my troubled conscience. By the way, President Bush totally and permanently ruined this Krishna statement for me, when he said, “You are either with us or against us.” On the plus side, thinking about Bush does soothe this guilt-laden conscience of mine to some degree. After all, I could have been worse. A lot worse…

Humor, Life and Death, Work and Life

Ridiculous, Annoying and Embarrassing

Now it is official — we become embarrassing, ridiculous and annoying when our first-born turns thirteen. The best we can hope to do, evidently, is to negotiate a better deal. If we can get our thirteen year old to drop one of the three unflattering epithets, we should count ourselves lucky. We can try, “I may embarrass you a bit, but I do not annoy you and I am certainly not ridiculous!” This apparently was the deal this friend of mine made with his daughter. Now he has to drop her a block away from her school (so that her friends don’t have to see him, duh!), but he smiles the smile of a man who knows he is neither annoying nor ridiculous.

I did a bit worse, I think. “You are not that annoying; you are not always ridiculous and you are not totally embarrassing. Well, not always,” was the best I could get my daughter to concede, giving me a 50% pass grade. My wife fared even worse though. “Oh, she is SOOO ridiculous and always annoys me. Drives me nuts!” making it a miserable 33% fail grade for her. To be fair though, I have to admit that she wasn’t around when I administered the test; her presence may have improved her performance quite a bit.

But seriously, why do our children lose their unquestioning faith in our infallibility the moment they are old enough to think for themselves? I don’t remember such a drastic change in my attitude toward my parents when I turned thirteen. It is not as though I am more fallible than my parents. Well, may be I am, but I don’t think the teenager’s reevaluation of her stance is a commentary on my parenting skills. May be in the current social system of nuclear families, we pay too much attention to our little ones. We see little images of ourselves in them and try to make them as perfect as we possibly can. Perhaps all this well-meaning attention sometimes smothers them so much that they have to rebel at some stage, and point out how ridiculously annoying and embarrassing  our efforts are.

May be my theory doesn’t hold much water — after all, this teenage phase change vis-a-vis parents is a universal phenomenon. And I am sure the degree of nuclear isolation of families and the level of freedom accorded to the kids are not universal. Perhaps all we can do is to tune our own attitude toward the teenagers’ attitude change. Hey, I can laugh with my kids at my ridiculous embarrassments. But I do wish I had been a bit less annoying though…

Corporate Life, French, Humor

Speak Your Language

The French are famous for their fierce attachment to their language. I got a taste of this attachment long time ago when I was in France. I had been there for a couple of years, and my French skills were passable. I was working as a research engineer for CNRS, a coveted “fonctionnaire” position, and was assigned to this lab called CPPM next to the insanely beautiful callanques on the Mediterranean. Then this new colleague of ours joined CPPM, from Imperial College. He was Greek, and, being new to France, had very little French in him. I took this as a god-given opportunity to show off my French connection and decided to take him under my wing.

One of the first things he wanted to do was to buy a car. I suggested a used Peugeot 307, which I thought was a swanky car. But this guy, being a EU scholar, was a lot richer than I had imagined. He decided to buy a brand-new Renault Megane. So I took him to one of the dealers in Marseille (on Blvd Michelet, if memory serves). The salesman, a natty little French dude with ingratiating manners, welcomed us eagerly. The Greek friend of mine spoke to me in English, and I did my best to convey the gist to the French dude. The whole transaction probably took about 15 minutes or so, and the Greek friend decided buy the car. After the deal was all done, and as we were about to leave, the Frenchman says, “So, where are you guys from, and how come you speak in English?” in flawless English. Well, if not flawless, much more serviceable than my French was at that point. We chatted for a few minutes in English, and I asked him why he didn’t let it on that he spoke English. It could’ve save me a world of bother. He said it was best to do business in French. For him, certainly, I thought to myself.

Thinking about it a bit more, I realized that it is always best to do business in whatever language that you are most comfortable in, especially if the nature of the transaction is confrontational. Otherwise, you are yielding an undue advantage to your adversary. So, next time you are in Paris, and that cabbie wants 45 euros for a trip when the meter reads 25, switch to English and berrate him before settling the issue. It softens the target, at the very least.

Humor, Life and Death, Philosophy, Physics

Everything and Nothing

I once attended a spiritual self-help kind of course. Toward the end of the course, there was this exercise where the teacher would ask the question, “What are you?” Whatever answer the participant came up with, the teacher would tear it apart. For instance, if I said, “I work for a bank as a quantitative finance professional,” she would say, “Yeah, that’s what you do, but what are you?” If I said, “I am Manoj,” she would say, “Yeah, that’s only your name, what are you?” You get the idea. To the extent that it is a hard question to answer, the teacher always gets the upper hand.

Not in my case though. Luckily for me, I was the last one to answer the question, and I had the benefit of seeing how this exercise evolved. Since I had time, I decided to cook up something substantial. So when my turn came, here was my response that pretty much floored the teacher. I said, “I am a little droplet of consciousness so tiny that I’m nothing, yet part of something so big that I’m everything.” As I surmised, she couldn’t very well say, “Yeah, sure, but what are you?” In fact, she could’ve said, “That’s just some serious bullshit, man, what the heck are you?” which is probably what I would’ve done. But my teacher, being the kind and gentle soul she is, decided to thank me gravely and move on.

Now I want to pick up on that theme and point out that there is more to that response than something impressive that I made up that day to sound really cool in front of a bunch of spiritualites. The tininess part is easy. Our station in this universe is so mindbogglingly tiny that a sense of proportion is the one thing we cannot afford to have, if we are to keep our sanity — as Douglas Adams puts it in one of his books. What goes for the physical near-nothingness of our existence in terms of space also applies to the temporal dimension. We exist for a mere fleeing instant when put in the context of any geological or cosmological timescale. So when I called myself a  “little” droplet, I was being kind, if anything.

But being part of something so vast — ah, that is the interesting bit. Physically, there is not an atom in my body that wasn’t part of a star somewhere sometime ago. We are all made up of stardust, from the ashes of dead stars. (Interesting they say from dust to dust and from ashes to ashes, isn’t it?) So, those sappy scenes in sentimental flicks, where the dad points to the star and says, “Your mother is up there sweetheart, watching over you,” have a bit of scientific truth to them. All the particles in my body will end up in a star (a red giant, in our case); the only stretch is that it will take another four and half billion years. But it does mean that the dust will live forever and end up practically everywhere through some supernova explosion, if our current understanding of how it all works is correct (which it is not, in my opinion, but that is another story). This eternal existence of a the purely physical kind is what Schopenhauer tried to draw consolation from, I believe, but it really is no consolation, if you ask me. Nonetheless, we are all part of something much bigger, spatially and temporally – in a purely physical sense.

At a deeper level, my being part of everything comes from the fact that we are both the inside and the outside of things. I know it sounds like I smoked something I wouldn’t like my children to smoke. Let me explain; this will take a few words. You see, when we look at a star, we of course see a star. But what we mean by “see a star” is just that there are some neurons in our brain firing in a particular pattern. We assume that there is a star out there causing some photons to fall on our retina and create neuronal firing, which results in a cognitive model of what we call night sky and stars. We further assume that what we see (night sky and star) is a faithful representation of what is out there. But why should it be? Think of how we hear stuff. When we listen to music, we hear tonality, loudness etc, but these are only cognitive models for the frequency and amplitude of the pressure waves in the air, as we understand sound right now. Frequency and amplitude are very different beasts compared to tonality and loudness — the former are physical causes, the latter are perceptual experiences. Take away the brain, there is no experience, ergo there is no sound — which is the gist of the overused cocktail conundrum of the falling tree in a deserted forest. If you force yourself to think along these lines for a while, you will have to admit that whatever is “out there” as you perceive it is only in your brain as cognitive constructs. Hence my hazy statement about we are both the inside and the outside of things. So, from the perspective of cognitive neuroscience, we can argue that we are everything — the whole universe and our knowledge of it is all are patterns in our brain. There is nothing else.

Want to go even deeper? Well, the brain itself is part of the reality (which is a cognitive construct) created by the brain. So are the air pressure waves, photons, retina, cognitive neuroscience etc. All convenient models in our brains. That, of course, is an infinite regression, from which there is no escape. It is a logical abyss where we can find no rational foothold to anchor our thoughts and crawl out, which naturally leads to what we call the infinite, the unknowable, the absolute, the eternal — Brahman.

I was, of course, thinking of Brahman ( and the notion that we are all part of that major oneness) when I cooked up that everything-and-nothing response. But it is all the same, isn’t it, whichever way you look at it? Well, may be not; may be it is just that I see it that way. If the only tool you have is a hammer, all the problems in the world look like nails to you. May be I’m just hammering in the metaphysical nails whenever and wherever I get a chance. To me, all schools of thought seem to converge to similar notions. Reminds of that French girl I was trying impress long time ago. I said to her, rather optimistically, “You know, you and I think alike, that’s what I like about you.” She replied, “Well, there is only one way to think, if you think at all. So no big deal!”  Needless to say I didn’t get anywhere with her.

Corporate Life, Science, Work and Life

The Student Debt Crisis

[Guest Post by By Sofia Rasmussen]

It has become common knowledge as certain as death and taxes that a college education leads to a better life. A recent Pew research poll found that Americans holding a Bachelor’s Degree can expect to make an additional $650,000 on average than those who have only graduated high school. That said, the loans many college students and parents need to take out to pay for higher education have college graduates asking themselves if it’s all worth it. Students are asking if that trip to MIT really a good investment at a 7% compounding interest rate and if going to Harvard is really worth that much more than a top online PhD degree. As debt increases, recent graduates are entering the workforce already overwhelmed, and economists are speculating as to whether the current trends in student loans may be leading to the nation’s next major debt crisis.

It’s easy to see why student loan debtors and economists are concerned. According to a report by the National Association of Consumer Bankruptcy Attorneys, individual college seniors owed an average of $25, 250 in 2010, up 5 percent from 2009. These trends are no less staggering on a macro level, with 2011 representing the first time that US student loan debt exceeds $1 trillion, higher than the amount of credit card debt Americans have accrued.  A report from Standard and Poor’s states that ‘student loan debt has ballooned and may turn into a pricing bubble’.

The US is not the only nation facing student debt issues. India has been struggling to handle  student loan applications that have more than doubled in five years, thanks to growing aspirations among the their previously lower economic class. As more Indians attend university, the cost of educational degrees has been on the rise and Educational loans from self-financing institutions in engineering, medical fields and management have become widely used. Also rising is default on debt, and India’s banks have taken notice. Banks have aimed to address bad loans by linking loan approval to employability. It is telling, then, that India’s banks do not provide any loan at all for a degree in Arts.

Whether or not student loan debt will lead to disaster for the economy at large remains to be seen, but for recent graduates, the crisis is readily apparent. Owing $25 thousand without ever having a full-time job or experience in one’s desired field can have a profound psychological effect. The student loan anxiety can impact job decisions throughout an entire career. Even if there are openings in the fields they specialize in during college, the burden of debt leads recent graduates to opt for work with the fewest potential risks. Often this work is outside of a student’s preferred field or less intellectually stimulating than they’re capable of handling. According to a recent article in The New York Times, only half the jobs landed by new graduates even require a college degree. A graduate with a degree in Arts may be dismayed to find there is little market for a vast and intricate knowledge of WWII era British Literature, even if they had found their knowledge of the subject lead to great success in college.

While the outlook is better for a sciences graduate, they too are often saddled with work in fields that are very different from what they passionately studied at university. There is certainly no lack of need in the sciences, but often graduates with little experience outside of the classroom are saddled with grueling hours and demanding work, work they would never take if it  weren’t for the threat of crushing debts to pay off.

Even as the cost of education continues to rise, parents around the world happily risk tens of thousands of dollars to send their children to best schools they can afford. For most young people, college remains a good investment. What may be changing is the sense of freedom that has traditionally been associated with college. Students may be expected to know exactly what they want to study much earlier in their educational career, perhaps even choosing specialized skill schools as opposed to the more rounded university experience. While it’s true, this may result in less culturally savvy graduates, for many students it may be the practical solution for an economically feasible life.

Corporate Life, Environment, Work and Life

Ethics In Business and Leadership

[This post is the speech given by Prof. Surya Sethi at World Forum for Ethics in Business – International Leadership Symposium Monday, April 2, 2012 in Singapore. Reproduced here with permission.]

I have been asked to cover a broad spectrum of issues relating to business regaining trust for sustainability within the context of climate change and the global energy crisis. Importantly, I have been asked to do so in 10 minutes reflecting the efficiency of the city-state we are in.

Let me begin by differentiating between moral and ethical values. Based on what I heard this morning, there appears to be some confusion between morals and ethics. The former define individual character and are based on personal beliefs of right and wrong or good and bad. The latter are essentially standards and codes of conduct, expected in a specific context, from the group an individual belongs to. Ethics typically encompass societal, corporate, national, professional or other similar compacts. Individually, we consider killing as morally wrong but an army killing thousands is considered ethical and is often decorated as an act of bravery for common good.

Business enterprises, today, manned largely by morally upright individuals are collectively killing the planet we share with a ferocity, intensity and speed matching that of war; and getting rewarded for creating unprecedented valuations and competitive supremacy. Consumption for the sake of consumption, growth for the sake of growth, profit for the sake of profit and support for policies and policy makers that uphold all of the foregoing are the ethical values guiding these enterprises.

The anthropogenic damage to the earth’s ecology over the last 60 years exceeds the damage done by humans over their entire history up to 1950. The fine balance between physical, chemical and biological processes that sustain the earth as a single interdependent system has been disturbed. The earth has moved well outside the range of her natural variability exhibited over the previous half a million years in the very least. Abrupt ecological changes with non-linear feedbacks in the earth’s dynamics, leading to catastrophic outcomes, are a real possibility today. Ethics should be price determining and not price determined by markets. Under-pricing natural capital and ignoring concomitant risks is fuelling the consumption boom.

Importantly, the growth, the consumption and the benefits have been concentrated in the privileged few. The top 20% of the world consumes 80% of its output while the bottom 80% lives on the balance 20%. The bottom 20% lives in dire poverty at a consumption of less than $1.25 PPP/day or about 50cents/day in nominal cents in a country such as India which is home to a third of these global unfortunate. Going just by income poverty, the number living below this dire threshold has come down by some 500 million – almost entirely because of a reduction in China. However, the broader multidimensional poverty index that includes parameters such as health, education, gender equality, access, empowerment etc. pushes the share of these destitute people to about 25% of the global population. Importantly, the number of people below the global poverty line of $2 PPP per day consumption remains stubbornly at about 2.5 billion or about 36 % of humanity.

Modern energy consumption is perfectly correlated to the Human Development Index (HDI) but it still eludes the bottom 2.5 billion who remain energy starved. While 1.5 billion among them, including over 500 million from India, have no access to electricity, 2.2 billion, including some 850 million from India use some form of biomass as their primary or only source of energy for cooking food –the most basic human necessity. A larger number would be denied access were we to price energy, one of earth’s fastest depleting natural resource, at its true value. The primary reason for this is the continuing disproportionate consumption by the well-to-do.

OECD countries, with a combined population less than India enjoy the world’s highest living standards. Yet, OECD’s incremental commercial energy consumption for the period 1997-2007 (before the financial crisis); was 3.2 times that of India. During this period, India’s share of global commercial energy consumption rose from 2.9% to 3.6% while OECD’s share fell from 58% to just over 50%. This drop was singularly due to the growth of China’s share as it became the world’s largest energy consumer.

The disproportionate consumption of energy is far worse than the figures reveal. In a globalized world, big business has moved significant parts of OECD’s production base in search of cheaper natural capital including the environmental commons, which though priceless, is still available for free in China and the developing world.

If one looks at GHG emission on a consumption basis and not production within their borders, then EU 15 emissions are up by 47% and the US emissions have risen 43% since 1990. The embedded emissions in imports of EU-15 are about 33% of emissions within their borders. This translates to about 3 tons per capita of embedded emissions in imports. The embedded emissions import for the US is 20% or about 4 tons/capita – In 2000, the level of embedded emissions imports in both the US and EU15 were only 3% . The embedded emissions alone in imports for US and EU-15 are twice and 1.6 times respectively of India’s total per capita GHG emissions.

The greatest lie that we are being told by big business and the policy makers supported by them is that resource efficiency is the answer to sustainability. Despite huge gains in resource use efficiency, the world is consuming more natural capital today than ever before and we are on auto pilot to at least a 3.5 degree Celsius warming. If IPCC is right, this will unleash catastrophic events and mass annihilation of the world’s poor in the foreseeable future.

Simply stated, current patterns of consumption and production, ladies and gentlemen, are unsustainable. CSR activities such as opening schools and hospitals or green-washing board rooms with efficient lights are simply inadequate. Also inadequate is a business mindset that first influences and then merely meets current regulations and sees value only in monetary terms based on a simplistic cost-benefit analysis

We need a policy framework that first limits our use of fossil fuels and other forms of natural capital and then gradually reduces it in a cradle to cradle paradigm fuelled by innovation. Our growth model must be an inclusive one that reduces unsustainable overconsumption by a few and redistributes that to the bottom 50% of this world. No, I do not seek to make the poor rich by making the rich poor – I simply seek the right of the bottom 50% of the world to have a dignity of life afforded by consumption at 50% of the poverty levels within the OECD. The current inequities whereby the world’s third largest economy in PPP terms (India) is placed 134th in terms of its HDI and has the world’s largest concentration of poor, malnourished adults and under-weight children are unsustainable.

Enlightened business leaders must not only define sustainability in terms of guaranteeing inter-generational resource equity but also see the unsustainability of not removing current intra generational inequities and thereby delivering the minimal adaptive capacity to the bottom 2.5 billion of fellow humans in the face of impending abrupt climate events.

In closing, I quote Mahatma Gandhi who said: “The world has enough to meet everyone’s need but not enough to satisfy even one man’s greed!”

I thank you for your time and attention.

French, Humor

Accents

Indians pronounce the word “poem” as poyem. Today, my daughter wrote one for her friend’s birthday and she told me about her “poyem”. So I corrected her and asked her to say it as po-em, despite the fact that I also say it the Indian way during my unguarded moments. That got me thinking — why do we say it that way? I guess it is because certain diphthongs are unnatural in Indian languages. “OE” is not a natural thing to say, so we invent a consonant in between.

The French also do this. I had this funny conversation with a French colleague of mine at Geneva airport long time ago during my CERN days. Waiting at the airport lounge, we were making small talk. The conversation turned to food, as French conversations often do (although we were speaking in English at that time). My colleague made a strange statement, “I hate chicken.” I expressed my surprise told her that I was rather fond of white meat. She said, “Non, non, I hate chicken for lunch.” I found it even stranger. Was it okay for dinner then? Poultry improved its appeal after sunset? She clarified further, “Non, non, non. I hate chicken for lunch today.”

I said to myself, “Relax, you can solve this mystery. You are a smart fellow, CERN scientist and whatnot,” and set to work. Sure enough, a couple of minutes of deep thinking revealed the truth behind the French conundrum. She had chicken for lunch that day. The “IA” as in “I ate” is not a natural diphthong for the French, and they insert an H in between, which is totally strange because the French never say H (or the last fourteen letters of any given word, for that matter.) H is a particularly shunned sound — they refuse to say it even when they are asked to. The best they can do is to aspirate it as in the textbook example of “les haricots”. But when they shouldn’t say it, they do it with surprising alacrity. I guess alacrity is something we all readily find when it comes to things that we shouldn’t be doing.

Corporate Life, Quantitative Finance, Work and Life

Subprime: When Good Intentions Turned Sour

As the world is still feeling the reverberations of the 2008 global financial crisis, a lot of blame has been directed onto subprime lending, and in particular mortgages, as the cause of much of the economic meltdown. However, subprime mortgages had their basis in good intentions, with their initial introduction aimed at helping less well-off families from getting on the housing ladder.

In 1999, Bill Clinton, perhaps the United States’ most equality driven president, asked the now notorious Fannie Mae, which at the time was America’s largest underwriter of home mortgages, to expand home loans to more people on low and moderate incomes. At the time, this was seen as a rather egalitarian move, allowing people without access to normal levels of borrowing, such as a credit card balance transfer or an overdraft, to buy their own home.

Reducing Risk

The problem with subprime loans was not in the initial intentions, but in the way banks tried to limit the risk that lending money to people with low incomes posed, whilst at the same time, make more money on the transaction. Of course, any money lent on a property has good security in the bricks and mortar. However, getting a return on any mortgage takes years and banks wanted a quicker way of making money on these subprime loans, while also limiting any potential risk. So they turned to what was seen as one of the greatest financial innovations of the 20th century, securitization.

Securitization is when banks bundle up loans into saleable packages, which they sell on to one another. Because the interest on subprime loans was much higher than normal loans, due to the credit risk of the borrowers, these securitized subprime packages offered large long-term rewards for buyers. By selling the loans on, banks reduced their risk, while at the same time the buyers of securities had the promise of a valuable long-term investment, which was seen as a win-win situation for all.

Rise and Fall of the Subprime

Banks began lending money to poorer and poorer people, tempting them with low initial interest rates. As a result, subprime lending doubled in just over a year, and because housing prices continued to rise, even those lenders the banks knew could never afford to continue repayments, the repossession rates would cover the loan and remove any risk. Until house prices fell.

Fuelled by record foreclosures as subprime borrowers failed to maintain their payments, house prices plummeted, as did confidence in subprime securities. What was once seen as a win-win investment opportunity now became toxic. The result was the loss of billions in the banking industry and the start of the worst financial crisis in 80 years. However, the victims in all this wasn’t the failed banks and investors left with worthless securities, but the innocent, low-income home owner, who, thanks to the greed and impatience of bankers and investors, ended up losing their homes.

Betting on Failure is no Way to run an Economy

The most powerful word in the financial markets is confidence. No matter how well or how badly a business, security or even a currency is doing, if it can maintain market confidence, the price will remain high. If the market for some reason loses confidence, then regardless of what the balance sheet says, prices plummet. So, with confidence playing such an important part of maintaining a healthy economy, the betting on failure could be argued to be one of the most toxic aspects of the entire economic system.

Hedge Funds

The phrase, “hedging your bets,” derives from bookmakers, who, when faced with a customer placing a substantial wager, hedge the bet, by placing their own wager elsewhere. And hedge funds are meant to work in the same way, reducing risk by insuring investments against failure.

Hedge funds deal in derivatives, an insurance contract that pays out when things go wrong. Derivatives are not necessarily a bad thing, companies and banks need some form of system to protect themselves from unforeseen events. However, during the global financial crisis, the derivatives market was poorly regulated, allowing a web of interlinked derivatives to accumulate across the insurance and financial services industry. As soon as a problem, such as the subprime crisis developed, financial insurers were left having to pay out huge sums. They then tried to recoup these losses by buying even more derivatives, causing a spiral of accumulating debt.

In the meantime, hedge funds were making so much money by betting on failures, their very presence was driving down confidence and leading to even more failures, which generated even more profits for the hedge funds and even more debt for the financial institutions. This resulted in the huge bailout figures that governments around the world have had to pay. The only winners in this whole fiasco have been the hedge fund companies. While derivatives and hedge funds didn’t start the financial crisis, this toxic investment in failure, certainly escalated it.

Philosophy, Physics, Quotes, Science

Bye Bye Einstein

Starting from his miraculous year of 1905, Einstein has dominated physics with his astonishing insights on space and time, and on mass and gravity. True, there have been other physicists who, with their own brilliance, have shaped and moved modern physics in directions that even Einstein couldn’t have foreseen; and I don’t mean to trivialize neither their intellectual achievements nor our giant leaps in physics and technology. But all of modern physics, even the bizarre reality of quantum mechanics, which Einstein himself couldn’t quite come to terms with, is built on his insights. It is on his shoulders that those who came after him stood for over a century now.

One of the brighter ones among those who came after Einstein cautioned us to guard against our blind faith in the infallibility of old masters. Taking my cue from that insight, I, for one, think that Einstein’s century is behind us now. I know, coming from a non-practicing physicist, who sold his soul to the finance industry, this declaration sounds crazy. Delusional even. But I do have my reasons to see Einstein’s ideas go.

[animation]Let’s start with this picture of a dot flying along a straight line (on the ceiling, so to speak). You are standing at the centre of the line in the bottom (on the floor, that is). If the dot was moving faster than light, how would you see it? Well, you wouldn’t see anything at all until the first ray of light from the dot reaches you. As the animation shows, the first ray will reach you when the dot is somewhere almost directly above you. The next rays you would see actually come from two different points in the line of flight of the dot — one before the first point, and one after. Thus, the way you would see it is, incredible as it may seem to you at first, as one dot appearing out of nowhere and then splitting and moving rather symmetrically away from that point. (It is just that the dot is flying so fast that by the time you get to see it, it is already gone past you, and the rays from both behind and ahead reach you at the same instant in time.Hope that statement makes it clearer, rather than more confusing.).

[animation]Why did I start with this animation of how the illusion of a symmetric object can happen? Well, we see a lot of active symmetric structures in the universe. For instance, look at this picture of Cygnus A. There is a “core” from which seem to emanate “features” that float away to the “lobes.” Doesn’t it look remarkably similar to what we would see based on the animation above? There are other examples in which some feature points or knots seem to move away from the core where they first appear at. We could come up with a clever model based on superluminality and how it would create illusionary symmetric objects in the heavens. We could, but nobody would believe us — because of Einstein. I know this — I tried to get my old physicist friends to consider this model. The response is always some variant of this, “Interesting, but it cannot work. It violates Lorentz invariance, doesn’t it?” LV being physics talk for Einstein’s insistence that nothing should go faster than light. Now that neutrinos can violate LV, why not me?

Of course, if it was only a qualitative agreement between symmetric shapes and superluminal celestial objects, my physics friends are right in ignoring me. There is much more. The lobes in Cygnus A, for instance, emit radiation in the radio frequency range. In fact, the sky as seen from a radio telescope looks materially different from what we see from an optical telescope. I could show that the spectral evolution of the radiation from this superluminal object fitted nicely with AGNs and another class of astrophysical phenomena, hitherto considered unrelated, called gamma ray bursts. In fact, I managed to publish this model a while ago under the title, “Are Radio Sources and Gamma Ray Bursts Luminal Booms?“.

You see, I need superluminality. Einstein being wrong is a pre-requisite of my being right. So it is the most respected scientist ever vs. yours faithfully, a blogger of the unreal kind. You do the math. 🙂

Such long odds, however, have never discouraged me, and I always rush in where the wiser angels fear to tread. So let me point out a couple of inconsistencies in SR. The derivation of the theory starts off by pointing out the effects of light travel time in time measurements. And later on in the theory, the distortions due to light travel time effects become part of the properties of space and time. (In fact, light travel time effects will make it impossible to have a superluminal dot on a ceiling, as in my animation above — not even a virtual one, where you take a laser pointer and turn it fast enough that the laser dot on the ceiling would move faster than light. It won’t.) But, as the theory is understood and practiced now, the light travel time effects are to be applied on top of the space and time distortions (which were due to the light travel time effects to begin with)! Physicists turn a blind eye to this glaring inconstancy because SR “works” — as I made very clear in my previous post in this series.

Another philosophical problem with the theory is that it is not testable. I know, I alluded to a large body of proof in its favor, but fundamentally, the special theory of relativity makes predictions about a uniformly moving frame of reference in the absence of gravity. There is no such thing. Even if there was, in order to verify the predictions (that a moving clock runs slower as in the twin paradox, for instance), you have to have acceleration somewhere in the verification process. Two clocks will have to come back to the same point to compare time. The moment you do that, at least one of the clocks has accelerated, and the proponents of the theory would say, “Ah, there is no problem here, the symmetry between the clocks is broken because of the acceleration.” People have argued back and forth about such thought experiments for an entire century, so I don’t want to get into it. I just want to point out that theory by itself is untestable, which should also mean that it is unprovable. Now that there is direct experimental evidence against the theory, may be people will take a closer look at these inconsistencies and decide that it is time to say bye-bye to Einstein.